Europe’s single currency concluded February eking out marginal gains against its US counterpart, delivering what many technical analysts will acknowledge as an indecision candle. Overall, the EUR/USD has been (and remains) in a downtrend since 2008, sporting clear lower lows and lower highs on the monthly chart.
Despite January’s engulfing candle (textbook engulfing candles focus on the real bodies, not range highs/lows), February offered limited downside. Immediate technical observations on the monthly timeframe draw focus to the 50-month Simple Moving Average (SMA) at $1.1134, a dynamic value that provided resistance alongside horizontal resistance at $1.1233 back in mid-2023. Support also continues to call for attention at $1.0516.
Meanwhile, price action on the daily timeframe is working between resistance at $1.0883 and support from $1.0739 (the 200-day SMA is nestled within at $1.0824 which price has been drawn to in recent days). Beyond current support exposes the monthly support level highlighted above at $1.0516, while exploring beyond $1.0883 could have price take aim at $1.1011 resistance. Another point of technical interest on the daily chart is the potential for a Head and Shoulders Top pattern to form, housing a left shoulder at the $1.1017 29 November 2023 high, a head at the $1.1139 28 December 2023 high and possibly a right shoulder at the $1.0888 22 February high.
H1 resistance area on the radar
From a shorter-term perspective, the $1.08 handle has withstood a number of downside attempts since 20 February. With that being said, $1.08 buying appears to be softening since the $1.0888 high: each test of $1.08 failed to print a meaningful higher high (shown by a descending resistance line taken from the high of $1.0888). This suggests that although buyers step in from $1.08, the pressure behind the moves is waning. Technical levels to be aware of this week are resistances at $1.0860 and $1.0846 and support below the $1.08 handle at $1.0789.
EUR/USD this week?
In view of the longer-term downtrend and scope to move lower on the monthly chart until support at $1.0516, along with the daily chart showing price action testing the underside of its 200-day SMA (and room to push south until support at $1.0739), medium-term technicals lean in favour of bears for the time being. Given this, the resistance between $1.0860 and $1.0846 on the H1 scale may prove too much for EUR/USD bulls and deliver a ceiling area to work with for sellers (in line with the bigger picture), targeting at least H1 support from $1.0789.
